Saudi dairy ordered to rescind price hike

AlMarai, Saudi Arabia's largest producer, was forced to reduce its milk prices after consumers protested over an "unjustified" increase in prices.

Saudi Arabia's largest food producer Almarai Dairy Company has been forced to reduce its milk prices after consumers protested over an "unjustified" increase.

Almarai early last month raised the price of a two-litre bottle of fresh milk by 14 per cent, from 7 Saudi riyals to 8 Saudi riyals, saying production costs have jumped because of the rising price of raw materials such as feedstock, which has gone up by 40 to 60 per cent in the past year.

The price of packaging material has also gone up by about 30 per cent, it said, in addition to the higher wages for workers, and higher maintenance and operation fees.

Attempting to cool down consumers' anger, the ministry of commerce forced all dairy companies to immediately revoke the price increase, or face penalties.

Almarai announced its compliance with the ministry of commerce and industry resolution, which warned dairy companies they could be penalised for arbitrarily increasing prices of fresh milk and laban packs.

"In compliance with the resolution issued by the ministry … Almarai is taking the price of its 2 litre fresh milk and laban pack sizes in the kingdom of Saudi Arabia to the level that prevailed with immediate effect," the company said on its website yesterday.

"However, Almarai believes that the rationale and justification for the price increase is still valid.

"We will continue to work with the relevant government authorities to address this issue."

Online campaigners were not convinced by the dairy producer argument. Over the last week, social networkers used the hash tags #mara3i, #StopMara3i and a Facebook page, calling for a Gulf-wide boycott.

"This harmed Almarai's image as we have seen online campaigns urging boycotts on Almarai," said Khalid Alruwaigh, the acting head of equity research at Al Rajhi Capital, a financial services company based in Riyadh.